Accounting (FICO) Journal of MM Goods Receipt (GR) and Invoice Receipt (IR) Transactions

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GR for initial entry for stock balance (movement type: 561).

T-Code used: MIGO or MB1C.

We must carry out an initial entry of stock balances when implementing the MM module of SAP R/3 System in order to transfer physical warehouse stocks or book inventories from an existing inventory accounting software into the SAP R/3 System as book inventories.
“Typically, a traditional accounting software program usually has an inventory sub module which records the inventories values in the balance sheet. But it’s not an online accounting software which record the inventory movement transaction in real-time basis like SAP does. Usually, this accounting software records the material movements transaction once in a certain period, e.g. once a month after get the information from other department.”

In the GR for initial entry for stock balance transaction, no physical movements actually take place.

The the typical accounting journal is:

Inventory account

Initial inventory clearing account
1000(DR)



1000(CR)





The initial inventory clearing account then will be cleared against other appropriate accounts by FI module.

GR for Purchase Order (PO) (movement type: 101).

T-Code used: MIGO or MB1C.

In a PO, the field that determines the accounting journal is “account assignment category” field. The account assignment in a PO is usually adopted from Purchase Requisition (PR).

The account assignment category determines:

  • The nature of the account assignment (cost center, sales order, and so on) .
  • Which accounts are to be charged when the incoming invoice or goods receipt is posted.
  • Which account assignment data you must provide.

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The most used Account Assignment Categories (AAC).

AAC
Description
Required account assignment data
Main asset number and sub-number
Cost center and G/L account number
“ ”
Inventory
Material number

For PO with account assignment “A” (Fixed Asset) the typical accounting journal is:

Fixed asset account

GR/IR Clearing Account
6000(DR)



6000(CR)





The first journal will increase the Asset and the second journal will increase the Liabilities (GR/IR is a liabilities account), and the Balance sheet stays balance (Asset = Liabilities + Equity).
The goods receipt/invoice receipt (GR/IR) clearing account is posted to whenever you receive goods that have not been invoiced yet or whenever you receive invoices for goods that have not been delivered yet.

For PO with account assignment “K” the typical accounting journal is:

Expense account

GR/IR Clearing Account
10(DR)



10(CR)





The first journal will decrease the Current year net profit (so it will decrease Equity) and the second journal will increase the Liabilities (GR/IR is a liabilities account), and the Balance sheet stays balance, since decrease in equity is balanced by increase in liabilities and asset stays the same (Asset = Liabilities + Equity).
For PO with account assignment “ ”(blank) the accounting journal depends on price control procedure of the material received. (see material valuation for detail on price control procedure).
  • If price control is “S” (standard price), the typical accounting journal is:
Inventory account

GR/IR Clearing Account
550(DR)



500(CR)










assumption:

Revenue from price differences account
standard price= 550


50(CR)











The first journal will increase the Asset by 550 and the second journal will increase the Liabilities (GR/IR is a liabilities account) by 500. The third journal will increase the net profit (so it will increase Equity) by 50, and the Balance sheet stays balance (Asset = Liabilities + Equity).

 

  • If price control is “V” (moving average price), the typical accounting journal is:
    Inventory account

    GR/IR Clearing Account
    500(DR)



    500(CR)





    The first journal will increase the Asset and the second journal will increase the Liabilities (GR/IR is a liabilities account), and the Balance sheet stays balance (Asset = Liabilities + Equity).

 

See material valuation to understand the effect of material’s price control procedure to the accounting journal on Goods Receipt transaction.
In the end, the accounting journal for price control procedure “S” and “V” will result the same to the Balance Sheet and Profit & Loss Statement. It is because as long as the business operation of the company runs, the material that received by this PO will be used, either for consumption or for sales. Let’s assume that there is no other transaction for this material.

The typical accounting journal for consumption for price control “S” is:

Inventory account

Material consumption expense account

550(CR)

550(DR)






The first journal will decrease the Fixed Asset by 550 (same amount with the increase of the Asset when GR is done, so it will result 0 in Inventory account). The second journal will decrease the current year profit, so it will decrease Equity, by 550. It will result -550+50(from “revenue from price differences account” when GR is done) =-500 (decrease in Equity).

The typical accounting journal for consumption for price control “V” is:

Inventory account

Material consumption expense account

500(CR)

500(DR)






The first journal will decrease the Asset by 500 (same amount with the increase of the Asset when GR is done, so it will result 0 in Inventory account). The second journal will decrease the current year profit, so it will decrease Equity, by 500.

GR Subcontract PO.
T-Code used: MIGO or MB1C.

In subcontract order processing, the vendor receives materials (components) with which it produces the finished-product. The following are involved:
  • We order the finished-product using a subcontract order (subcontract PO). The components that the vendor needs to manufacture the finished-product are specified in the purchase order, and we provide them to vendor.
  • When we send the component to vendor, in Inventory Management, we transfer those components from unrestricted-stock to special stock (“stock of material provided to vendor”). These special stocks are still shown as our stock in MMBE (T-code for stock overview). This transaction will not post the accounting journal.
  • The vendor performs its service and delivers the ordered material (the finished-product). GR is done for the finished-product, and automatically the consumption of the components is posted.

The typical accounting journal when GR is done is:

Inventory account (fin.-product)

Inventory account (comp. mat)
1000(DR)



800(CR)






GR/IR clearing account



200(CR)













Assumption: The vendor’s fee (PO value) =200; the component value=800.

The first journal will increase the Asset by 1000, and the second journal will decrease the Asset by 800. The third journal will increase the Liabilities (GR/IR is a liabilities account) by 200, so the Balance sheet stays balance, Asset (1000-800) = Liabilities (200) + Equity (0).

Invoice Receipt (IR)
T-Code used: MIRO or MIR6 and MIR7.
The typical invoice accounting journal is:

GR/IR Clearing account

Vendor account
(Account Payable)
1000(DR)



1000(CR)





The goods receipt/invoice receipt (GR/IR) clearing account is posted to whenever you receive goods that have not been invoiced yet or whenever you receive invoices for goods that have not been delivered yet.
See material valuation to understand the effect of material’s price control procedure to the accounting journal on Invoice Receipt transaction.
The vendor account (account payable) will be followed up by finance department using FI module to payment processing. The typical accounting journal of the payment processing is:
Vendor account (Account Payable)

Cash / Bank account
1000(DR)



1000(CR)





GR other/without PO (movement type: 501)
T-Code used: MIGO or MB1C.
The the typical accounting journal is:

Inventory account

Other revenue account
1000(DR)



1000(CR)





See Accounting Journals of SAP Material Management (MM) Transactions

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8 thoughts on “Accounting (FICO) Journal of MM Goods Receipt (GR) and Invoice Receipt (IR) Transactions

  1. Can any one share their experience of changing price control from moving average price to standard price?
    Thanks in advance

  2. I want WIP accounting entries to be done in SAP. From WIP moving to SFG. How can i get to know whether labour, RM and other overheads has been incurred for that stage in WIP? Will be very useful if i got the answer as soon as possible? In simple terms, have to do WIP Valuation? Assist Me Pls?

  3. Hello Arun,
    You may configure a "WIP" Storage location and post the inventory to this location. With this you have an option to do WIP valuation.

  4. Pingback: Accounting (FICO) Journals of SAP Material Management (MM) Transactions | HoangPT's blog

  5. Dear All,

    For a Purchase Order, Goods Receipt (MIGO),Invoice Receipt (MIRO), has been created. How to make Payment for this Invoice(Tcode and table where it is stored) and Delivery header and details(Tcode and table where it is stored)

    Thank you

  6. pls verify the document.when raw material is issued for consumption…asset decreases and equity decreases….thats right.but the transaction will be

    raw material CONSUMPTION expence a/c——DR
    raw mat stock(inventory a/c)—-CR

    BUT YOU HAVE STATED THE REVERSE.PLS VERIFY AND COMMENT IF I AM WRONG.

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